Case 1:14-cr-20025-JEM Document 57 Entered on FLSD Docket 11/20/2014 Page 1 of 11
NOV 20, 2014 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA
CASE NO. 14-20025-CR-JEM (s)(s) 18 U.S.C. j 1349 26 U.S.C. j 7201 18 U.S.C. j 981(a)(1)(C)
UNITED STATES OF AM ERICA
VS.
CARL FIORENTINO,
Defendant. /
SECONP SVPERSEDING INFORM ATION
The United States Attorney charges that:
GENER AL ALLEGATIONS
At times material to this Second Superseding lnform ation:
Systemax, Inc. (t%systemax'') was a Delaware corporation with its principal place
of business in Port W ashington, New York. Systemax sold personal computers and other
consumer electronics through its websites, retail stores and direct mail catalogs. ln tiscal year
2010, Systemax had annual sales revenue of approximately $3.6 billion. Systemax was a public
company and its common stock was traded on the New York Stock Exchange. Systemax was an issuer with a class of securities registered pursuant to Section 12 of the Sectuities and
Exchange Act of 1934, and it was obligated to file reports with the U .S. Securities and Exchange Commission ($çSEC'') pursuant to Section 15(d) of the Act.
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2. TigerDirect was a subsidiary of Systemax with its principal place of business in
Miami, Florida. TigerDirect was a part of the Teclmology Products Group ($tTPG'') of
Systemax. TPG marktted and sold technology products under several brand names, including TigerDirect, CompUSA, and Circuit Uity.
Defendant CARL FIORENTINO was a resident of Miami, Flolida and a senior
executive of TigerDirect who used the title of President. CARL FIORENTINO had
responsibility for negotiating and purchasing teclmology products from vendors who did
business with TigerDirect.
4. Conspirator Gilbert Fiorentino was a resident of M iami, Florida, the Chief
Executive Ofticer of TPG and TigerDirect, and a member of the Board of Diredors of Systemu .
CARL FIORENTINO reported to his brother, Gilbert Fiorentino, and both worked at TigerDirect's Minmi offices.
5. As a public company, Systemax was required to comply with Section 404 of the Sarbanes-oxley Act of 2002, 15 U.S.C. j 7262, that required certain management personnel to
sign annual contlict of interest questiormaires, certifications of compliance with Systemax's corporate ethics policy, and representations about transactions out of the course of ordinary business. These questionnaires included a representation whether the employee had tçreceiveld) or magdel any arrangements for the receipt of any compensation or other personal financial
benetit from a current or potential supplier, competitor or customer'' of Systemax.
CARL FIORENTINO and Gilbert Fiorentino periodically signed conflict of
interest questiolmaires from 2005 through 201 1, and provided these to Systemax as part of the
company's internal control over financial reporting.
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Pursuant to Regulation S-K, 17 C.F.R. j 229.404(c)(2)(ix), Systemax was required to disclose all compensation Gilbert Fiorentino received each tiscal year, including all
personal benefits and property, unless the amount was less than $ 10,000. Regulation S-K, 17 C.F.R. j 229.404($, also required that Systemax provide a description of any transaction or series of transactions exceeding $120,000, to which Systemax was a party, and that Gilbert
Fiorentino or CARL FIORENTINO had a direct or indirect financial interest.
8. E.K. was the principal of R.I., T.S. and C.O., all of which operated as one entity (collectively tçR.l.''). Between 2002 and 201 1, R.l. was a supplier of computer components to TigerDirect. R.I. sourced and purchased computer products in Asia and re-sold and delivered
them to TigerDired at a markup. R.I. conducted nearly all of its sales with TigerDirect, had no other significant customers, and had more than $150 million in sales to TigerDirect during this
time period.
9, The Internal Revenue Service (t(IRS'') was an agency of the United States Department of the Treasury responsible for enforcing and administering the tax laws , and
ascertaining, computing, assessing and collecting income taxes owed to the United States.
CO UNT 1 Conspiracy to Comm it Mail and Wire Fraud (18 U.S.C. 5 1349)
1. Paragraphs 1 through 9 of the General Allegations section of this Second
Superseding Information are re-alleged and incomorated herein by reference.
Beginning in or around January, 2003, and continuing until at least on or about
April 18, 201 1, in Miami-Dade County, in the Southem Distrid of Florida, and elsewhere, the defendant,
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CARL FIORENTINO ,
did willfully, that is, with the intent to further the objectsof the conspiracy, and knowingly
combine, conspire, confedeiate, and agree with Gilbert Fiorentino, E.K. and others known and unknown to the United States Attorney to commit certain offenses against the United States , that is:
a) to knowingly and with intent to defraud, devise and intend to devise a scheme and artifke to defraud and to obtain money and property by means of materially false and fraudulent
pretenses, representations, and promises, knowing that they were false and fraudulent when
made, and knowingly causing to be delivered certain mail matter by U .S. mail and by private and
commercial interstate carrier, according to the directions thereon, for the pum ose of executing
the scheme, in violation of Title 18, United States Code, Section 1341; and b) to knowingly and with intent to defraud, devise and intend to devise a scheme and artifce to defraud, and to obtain money and property by means of materially false and fraudulent
pretenses, representations, and promises, knowing that they were false and fraudulent when
made, and transmitting and causing to be transmitted in interstate and foreign comm erce , by
m eans of wire communication, certain m itings, signs, signals, pictures and sounds, for the
purpose of executing the scheme and artitsce, in violation of Title 18, United States Code, Section 1343.
PURPOSE OF- THE CON SPIRACY
lt was a purpose of the conspiracy for CARL FIORENTINO and his
conspirators to unlawfully emich themselves by concealing from the independent auditors and
shareholders of Systemax, the receipt by CARL FIORENTINO and Gilbert Fiorentino of
m onies and valuable goods and services from various vendors and third parties who did business
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with Systemax, and to not pay income taxes related to such monies, goods and services, so that
CARIU FIORENTINO and Gilbert Fiorentino could keep the monies, goods and services for
their own personal use and benefit, and certain conspirators could obtain and retain business with
Systemax.
M ANNER AND MEANS OF THE CONSPIM CY
The manner and means by which the defendant and his conspirators sought to accomplish the objects and purpose of the conspiracy included, among others, the following:
4. CARIU FIORENTINO and Gilbert Fiorentino, along with their conspirators, agreed to receive undisclosed kickbacks and side payments from third parties, vendors and
independent contractors who did business with TigerDirect and other TPG businesses of
Systemax. ln exchange for such paymtnts, CARIU FIORENTINO and Gilbert Fiorentino
directed business to the third party vendors who made such payments.
CARIU FIORENTINO instructed the third parties to pay him directly and
indirectly through intermedimies, in cash, or in a form that could not be easily traced or detected
by Systemax or the IRS.
6. In the case of E.K. and his companies, CARL FIORENTINO and Gilbert
Fiorentino caused TigerDirect to pay approximately $157 million between January 2003 and
January 201 1, for computer and electronics components. During this time, E.K . paid CARL FIORENTINO and Gilbert Fiorentino kickbacks in the form of cash payments, indirect
payments, gift cards, and the purchase of luxury items. ln total, E.K. paid kickbacks to CARIU
FIORENTINO and Gilbert Fiorentino totaling more than $9 million, though the amounts paid to
CARL FIORENTINO by E.K. were substantially greater than those paid to Gilbert Fiorentino.
Kickback payments were made by E.K. to CARI, FIORENTINO in the form of
interstate and international wire transfers, among other ways. E.K. and CARIU FIORENTINO
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coordinated kickback payments using personal email accounts that would not be detected, and
would send and receive interstate and intemational email comm unications between M iami, Florida and other states and countries. E.K. and CARL FIORENTINO caused to be delivered
in the U.S. m ail, various documents and communieations related to the scheme, including invoices from third parties that provided goods or services to CARL FIORENTINO but for
which E.K. paid directly as a fonn of kickback.
8. CARL FIORENTINO demanded and obtained kickbacks from other vendors
who did business with TigerDixect, and demanded that these payments be made in the form of
cash, direct payments for goods or services, or other forms.
9. Between 2005 and 201 1, CARL FIORENTINO and Gilbert Fiorentino signed
conflict of interest questionnaires in which they falsely and fraudulently concealed from
Systemax their receipt of cash, and other remuneration from vendors who did business with
Systemax. Gilbert Fiorentino regularly met with the independent auditors of Systemax at the
offices of TigerDirect in M iami, while the auditors were conducting quarterly reviews and
annual audits of the company. In written management representation letters and in direct
conversations, Gilbert Fiorentino m ade false and m isleading statements to the company's
auditors regarding the accuracy of the company's books, records and accounts, as they pertained
to his own compensation, the compensation of his brother CARI, FIORENTINO , and their
receipt of kickbacks from third pm ies,among other things. These false and misleading statements and omissions were material to the ability of the auditors to perform accurate reviews
and audits of the company's books, records, and accounts, and to assess Systemax's internal controls over financial reporting.
10. Between 2003 and M arch 17, 201 1, CARL FIORENTINO and Gilbert
Fiorentino caused Systemax to file Forms 10-K with the SEC that failed to disclose the 6
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fraudulent kickback scheme and the related party transactions involving CARL FIORENTINO
and Gilbert Fiorentino, and underreported the compensation of Gilbert Fiorentino, for the time
periods covered by the reports. These reports represented to the investing public that Systemax
had internal controls over financial reporting that allowed for the company's books, records and
accounts to fairly and accttrately depid the transactions of the company. By their actions,
CARL FIORENTINO and Gilbert Fiorentino caused System ax to not disclose their kickback
scheme to the investing public.
CARL FIORENTINO filed personal income tax returns on IRS Form 1040 for
tax years 2007 tllrough 2010, that failed to disclose compensation he received in the form of
kickbacks from third party vendors, including cash and other payments, by at least
$5,256,705.75, and resulting in a tax loss of at least $1,8 10,760.
Al1 in violation of Title 18, United States Code, Sedion 1349.
C -OUNT 2 Tax Evasion (26 U.S.C. : 7201)
Paragraphs 1 through 9 of the General Allegations section of this Second
Superseding lnformation are re-alleged and incoporated herein by reference.
On or about August 20, 2008, in Miami-Dade County, in the Southern District of
Florida, the defendant,
CARL FIORENTINO,
a resident of Minmi, Florida, did willfully attempt to evade and defeat a large part of the income
tax due and owing by him to the United States of America for the calendar year 2007, by filing
and causing to be filed with the Internal Revenue Service Center, at Philadelphia, Pennsylvania,
a false and fraudulent U.S. lndividual Income Tax Return, Form 1040. ln that false return,
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CARL FIORENTINO stated that his taxable income for the calendar year 2007 was the sum of
$71 8,680, and that the amount of tax due and owing thereon was the sum of $2 15,530. ln fact,
as he then and there knew, his taxable income for the calendar year was the sum of
$4,989,378.45, upon which taxable income there was owing to the United States of America an income tax of $1,409,640.
In violation of Title 26, United States Code, Section 7201.
FORFEITURE (18 U.S.C. j 981(a)(1)(C)) The General Allegations section of this Second Superseding lnformation is
re-alleged and incomorated herein by reference for the purpose of alleging forfeiture to the
United States of America, of property in which CARL FIORENTINO has an interest.
Upon conviction of Count 1 of this Second Superseding Information, CARL
FIORENTINO shall forfeit to the United States any property, real or personal, which constitutes
or is derived from proceeds traceable to the offense of conviction. The property subject to fodkiture includes, but is not limited to: a. a sum of $1,961,049.90, and all proceeds traceable thereto, as proceeds from the
defendant's December 2013 sale of his former residence at 130 Casuarina Concourse, Coral Gables, Florida;
b. $7,500 in cash from Wells Fargo bank account ending in X-522 1;
Any financial interest in, or licenses related to, professional sports tickets, including any such license or interest related to the ATP Sony Ericsson Open Telmis Event in
Key Biscayne, Florida;
d. All interest in 100 shares of the securities of %iGOGO.com;''
Jewelry, including watches, valued at approximately $40,000) and
8
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Any saleable home fumishings valued atgreater than $5,000, including one chandelier valued >t approximately $30,000. Pursuant to Title 21, United States Code, Section 853(p), made applicable through Title 28, United States Code, Section 2461, if any property described above as being subject to forfeiture, as a result of any ad or omission of the defendant: cnnnot be located upon due
diligence; has been transferred, sold to, or deposited with a third party; has been placed beyond
the jurisdiction of the Court; has been substantially diminished in value; or, has been commingled with other property which cannot be subdivided without difficulty; it is the intent of
the United States to seek the forfeiture of other property of the defendant up to the value of the
above-described forfeitable property.
All pursuant to Title 18, United States Code, Sedions 981(a)(1)(C) and the procedures
set forth in Title 2 1, United States Code, Section 853, made applicable through Title 28, United States Code, Section 2461(c). l /- W IFREDO A. FERRER UNITED STATES ATTORN EY
JERR DUFFY ASSISTANT UNITED STATES ATTORNEY
9
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UNITED STATES OF AMERICA CASE NO. 14-CR-20025(s)(s) VS. CERTIFICATE OF TRIAL AU ORNEY* CARL FIORENTINO, Defendant. / Superseding Case Information:
court Division: lselect one) New Defendantts) Yes No X Number of New Defendants X M iami Key West Total number of counts FTL W PB FTP 1 do hereby certify that: 1 have carefully considered the allegations of the indictment, the number of defendants, the number of probable witnesses and the Iegal complexities of the Indictment/lnformation attached hereto. I am aware that the information supplied on this statement will be relied upon by the Judges of this Court in setting their calendars and scheduling criminal trials under the mandate of the Speedy Trial Act, Title 28 U.S.C. Section 3161. lnterpreter: (Yes or No) NO List Ianguage and/or dialect
This case will take Q, days for the parties to try. Please check appropriate category and type of offense Iisted below:
(Check only one) (Check only one) I 0 to 5 days X PettY 11 6 to 10 days M i nor 11 11 to 20 days M isdem. IV 21 to 60 days Felony V: 61 days and over 6. Has this case been previously filed in this District Court? (Yes or No) Yes Judge: Honorable Jose E. Martinez Case No. 14-20025-CR-JEM(s) (Attach copy of dispositive order) Has a complaint been filed in this matter? (Yes or No) No If yes: M agistrate Case No. Related Miscellaneous numbers: Defendantts) in federal custody as of Defendantts) in state custody as of Rule 20 from the Dlstrlct o Is this a potential death penalty case? (Yes or No) No Does this case originate from a matter pending in the Northern Region of the U.S. Attorney's Office prior to October 14, 2003? Yes X No
8. Does this case originate from a matter pending in the Central Region of the U.S. Attorney's Office prior to September 1, 2007? Yes X No
JERRO D F Y ASSIS N UNITED STA S AU ORNEY Court I o. A5501106
*penalty Sheetts) attached REV 4/8/08
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA
PENALTY SHEET
Defendant's Nam e: CARL FIORENTINO
Case No: 14-20025-CR-JEM (s)(s)
Count #: 1
Conspiracv to Comm it Mail and Wire Fraud
Title 1 8. United States Codes Section 1349
* Max. Penalty: Twenty (20) years' imprisonment
Count #: 2
Tax Evasion
Title 26s United States Code. Section 7201
* Max. Penalty: Five (5) years' imprisonment
WRefers only to possible term of incarceration, does not include possible fines, restitution, special assessments, parole terms, or forfeitures that may be applicable.
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